Sept. 4 (Bloomberg) -- Stephen Elop, already an odds-makers’ favorite to take over as Microsoft Corp.’s next leader,
just boosted his chances by helping orchestrate the $7.2 billion
deal that makes him a senior executive at the software maker he
once helped run.

The 49-year-old Canadian, who has been chief executive
officer at Nokia Oyj for three years, will move back to
Microsoft as it buys the Finnish company’s mobile-phone unit.
The one-time head of the software maker’s business division
returns with experience competing head-on in mobile devices
against Apple Inc. and Google Inc.

Microsoft needs a leader to help it add market share in
smartphones, tablets and search as CEO Steve Ballmer prepares to
step down. While Elop did little at Nokia to erode Apple and
Google’s lead, he was a loyal Microsoft partner who negotiated
the agreement that landed Windows on millions of phones.

“Elop is on the short list of possible CEO candidates,”
said Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki.
“He has the right experience from working both inside and
outside the company.”

Elop nonetheless has detractors who decry his failure to
make Nokia profitable, and its shares have declined by half on
his watch. Ballmer, one of Microsoft’s largest owners with about
4 percent of its outstanding shares, declined to say yesterday
whether Elop is a candidate to succeed him as CEO.

No Shoo-In

“Given the performance of Nokia under Elop’s stewardship,
getting the CEO job would seem a pretty big reward,” said
Charles Golvin, an analyst at Forrester Research Inc. in
Cambridge, Massachusetts. “From a financial perspective, it
wasn’t a stellar performance.”

Microsoft, based in Redmond, Washington, has said it will
consider internal and external candidates to replace Ballmer.
Tony Bates, Satya Nadella, Qi Lu and Terry Myerson are the other
leading choices among Microsoft’s executives, according to
people with knowledge of the matter, who asked not to be
identified because the process isn’t public.

If Microsoft brings in a leader from outside, analysts have
suggested candidates including EBay Inc. CEO John Donahoe and
Sheryl Sandberg, Facebook Inc.’s chief operating Officer.

Microsoft and Espoo, Finland-based Nokia have had a close
relationship through Elop, who was in charge of Microsoft’s
Office products and helped lead the division’s cooperation with
its Finnish handset partner. He left the software maker in
September 2010 to take the top job at Nokia.

Burning Platform

At Nokia, Elop took over as the mobile-phone pioneer’s
market-share losses to the iPhone and Google’s Android devices
threatened to accelerate. At the time, he likened Nokia’s
position to a person standing on a burning oil platform on the
verge of being engulfed in flames, facing the option of staying
aboard or jumping to the ocean to have a chance to survive.

In February 2011, Elop struck a deal with Ballmer to switch
Nokia’s smartphones from its own Symbian operating system to
Windows Phone. In exchange, Microsoft paid more than $1 billion
to Nokia for marketing and development of products on Windows.

Before his careers at Microsoft and Nokia, Elop ran
Macromedia Inc., focusing on Flash Internet software and helping
to arrange the company’s $3.4 billion sale to Adobe Systems Inc.
in 2005.

During his year as COO at Juniper Networks Inc., he oversaw
reorganizations that helped expand profit margins and boost
sales, closing the gap with networking leader Cisco Systems Inc.
Then, days before Juniper was to name him CEO in 2008 -- the
press release had already been written -- Elop quit to join
Microsoft.

Nokia Outsider

At Nokia, Elop became the first non-Finn to run the company
and challenged its slower-moving, consensus-driven culture. He
took over from a 30-year Nokia veteran.

Elop’s effort to transform Nokia’s handset business hasn’t
led to an earnings recovery, with the company losing more than 5
billion euros ($6.6 billion) in nine quarters. Even as sales of
the Lumia smartphone brand -- introduced under Elop -- have
started to rise, Nokia has made scant market-share gain against
Google’s Android and Apple’s iPhone.

Among the victories Elop can claim: In the first quarter,
on the strength of Lumia, Microsoft beat out BlackBerry as the
third-largest smartphone operating system, according to a
Gartner Inc. report. Elop has also helped attract new
application developers through Lumia’s nascent sales gains.

Lumia Brand

The Lumia brand will follow Elop to Microsoft, which also
will license the Nokia brand for 10 years to be used in cheaper,
more basic phones. That means Elop gets to work with many of the
same partners and customers he knows from Nokia.

“We can invest more resources into the effort, and we can
build on the momentum that has already been established,” Elop
said yesterday on Ballmer’s conference call with analysts.

Elop also has experience overhauling a major corporation.
He has cut tens of thousands of jobs in a bid to revive Nokia
after the company fell outside the top five in smartphone
rankings and became unprofitable.

After the sale to Microsoft, Nokia’s biggest business will
be a network-equipment division that competes with Ericsson AB,
Alcatel-Lucent SA and China’s Huawei Technologies Co.

Microsoft’s profit in the latest quarter missed analysts’
projections by the most in at least a decade as the Windows
business shrank. Poor sales of the Surface tablet computer led
to an inventory writedown of $900 million, more than the $853
million in Surface sales in the latest fiscal year.

Stocks Languish

Neither Elop nor Ballmer has been a boon to his company’s
shares. Nokia stock has dropped by half since Elop was hired on
Sept. 10, 2010, even with yesterday’s 34 percent gain to 3.79
euros in Helsinki. The stock added 0.5 percent today. Microsoft
declined 2.2 percent to $31.20 at the close in New York, and the
stock is down more than percent since Ballmer became CEO in
2000.

To revive Microsoft’s mobile business, Elop will face the
same challenge he faced at Nokia: getting more consumers to give
Windows devices a chance. Android and Apple cornered 92 percent
of the 237 million-unit smartphone market in the second quarter,
compared with Windows’ 3.6 percent, according to IDC.

“If Elop hadn’t made some of the drastic moves he did,
such as switching operating systems, it would have ended up like
Palm,” the pioneering handheld-device company that eventually
got sold to Hewlett-Packard Co., said Francisco Jeronimo, an
analyst at researcher IDC in London. “Moving to Windows was the
right decision, but Elop probably wasn’t expecting the ecosystem
to take so long to grow.”

Elop ‘Jumped’

Even so, Elop’s playbook may not work at Microsoft,
Forrester’s Golvin said. Wrangling an array of operating
systems, tablets, phones and services into something consumers
will love is “at least an order of magnitude more
challenging,” he said.

Given Nokia’s struggles on his watch, Elop may have had
little sway over his fate, Golvin said.

“He wrote this famous memo about the burning platform,”
Golvin said. “But the cynic would say he jumped -- and somebody
threw him a lifeline.”

That lifeline may just secure his place as Microsoft’s CEO
one day. The odds of Elop getting the job shortened to 4-to-6
after yesterday’s deal, from 5-to-1, at Ladbrokes Plc, the U.K.-
based gambling operator. It puts Elop ahead of Facebook’s
Sandberg, whose odds moved to 7-to-1 from 2-to-1 with
yesterday’s deal. The chances also got slimmer for Andreessen
Horowitz board partner Steve Sinofsky, who is a former top
Microsoft executive, and Kevin Turner, another internal
candidate.